CVS Health (NYSE: CVS – $97.51) reported net revenues for the three months ended June 30, 2016 increased 17.6%, or $6.6 billion, to $43.7 billion, compared to a year ago, but missed the mean Street estimate for $44.28 billion. Revenues in the Pharmacy Services Segment increased 20.7%, or $5.1 billion, to $29.5 billion in the quarter. The increase was primarily driven by increased pharmacy network claim volume and growth in specialty pharmacy. Pharmacy network claims processed during the three months ended June 30, increased 22.6% to 280.5 million, compared to 228.8 million in the prior year. The increase in pharmacy network claim volume was primarily due to the growth in net new business. Revenues in the Retail/Long-Term-Care Segment increased 16.0% to about $20.0 billion, thanks in part to the acquisition of Omnicare last year. Pharmacy same store sales rose 3.9% and pharmacy same store prescription volumes rose 3.5%. Front store same store sales decreased 2.5%, including the effect of the shift of Easter from April in 2015 to March in 2016, which resulted in a decrease in front store same store sales of approximately 80 basis points. Front store same store sales were also negatively affected by softer customer traffic, partly offset by an increase in basket size. In all, adjusted earnings per share increased 8.3% to $1.32 from last year and topped expectations for $1.30.
CVS now sees full-year earnings of between $5.81 to $5.89 from previously guided $5.73 to $5.88 and mostly above forecasts for $5.82. For the upcoming third quarter, the company is forecasting adjusted EPS between $1.55 to $1.58, in line with estimates. The shares, which have lagged the market over the past year, bounced about 4% on the earnings and guidance news. The company is well run; reasonably valued at 16.6 times full year 2016 earnings and 15 times estimated earnings for next year; provides a 1.8% dividend yield and should continue to take advantage of its health conscious and aging demographic. Things get even better on a risk-adjusted basis as the company has strong finances, ample cash flow, a low beta coefficient and dependable earnings predictability. Long-term investors should be well rewarded.